Japan's US exports fall 10% in July, down for 4th straight month
Ideas
As has been reported in other articles recently Japanese car makers reduced the prices of some cars and exported cheaper models to the US which reduced the value of Japanese exports.
For Japanese cars manufacturers and car parts producers its hard to plan correctly as they still don't know what the final tariff rate will be as it's still up in the air and it can change day to day.
Again, Japanese car manufacturers have started exporting less expensive cars to the US which of course will reduce the trade surplus.
The trade surplus is very important for the Japanese economy as its part of Japan's current account and offsets imports coming into Japan.
Japan is resource-poor country and has to import much of what it needs which reduces Japan's current account while exports increase the current account.
At the same time, lately, the only real economic driver for the Japanese economy has been exports as there doesn't seem to be any other real economic activity that increases economic growth.
An economic driver is any economic activity that significantly increases economic growth and Japan has very now.
Again, Japan is a resource-poor country which means it imports much of what it needs and crude oil and coal are key import commodities that Japan needs to function.
But again, imports deplete Japan's current account and lower import prices help to improve Japan's current account and helps to lower Japan's trade deficit.
Japan re-built its economy on exporting as they knew that the domestic economy was/is not strong enough to grow the economy alone, but it seems that Japan hasn't been able to harness any domestic economic activities to really help the economy grow besides exporting.
While the tariff rate at 15 percent is much better the timing of when it will be implemented is the key factor as Japanese companies still don't know when the tariff rate will go into affect which means they really can't plan much just yet.
Even at 15 percent most likely the large Japanese car makers will be relatively safe while the smaller car makers might have challenges absorbing the tariff rate and will eventually have to pass-on the rate to the next in the supply chain, unless the smaller Japanese car makers and their larger partner work together to the shock on the smaller car makers.
At the same time, Japan has thousands of small car parts manufacturers that are going to be challenged and their profit margins are probably too small to absorb the tariffs and they too will need to either pass-on the tariff rates to the next in their supply chain and or get help from the large Japanese car manufacturers.
Again, its not just the large Japanese car manufacturers such as Toyota, Honda, and Nissan that will be affected but thousands of small car parts manufactures and many other companies in Japan that export to the US.
While the Japanese government can't help everyone they should target which industries or sectors they feel are the most vulnerable and find ways to help them such as the thousands of smaller car parts manufacturers in Japan they might make only one or two products used in cars.
And at the same time the Japanese semiconductor industry in Japan was just beginning to get back on its feet and finally back in the semiconductor game after losing significant market share to Taiwan and South Korea and is probably another vulnerable industry that the Japanese government needs look at and find ways to protect those companies.
The US economy is not as robust as it was a few years ago and prices seems to be increasing again, and if Japanese car makers pass on the tariffs rates to the next in the supply chain it might mean US Japanese car dealer ships will increase their prices and US consumers might not like the idea of more increased prices to deal with.
And then yes, US car dealer ships or whomever in the supply chain will say the can't or don't need any more cars as they can't sell the cars they have now on their lots.
Japan car makers maybe need to prepare for a slow year in 2025 or even 2026 and prepare their stockholders not to expect much growth the next few years until they can figure out how to deal with the tariff situation and or hope China's economy begins to growth again.
The Chinese economy is not in a good place at this time as its still dealing with internal economic challenges and still hasn't been able to work those challenges out just yet.
As the same time, Japanese car makers are experiencing robust competition from the up and coming Chinese car makers who are gaining significant market share daily and not just in China but globally too.
China is still a very significant market for Japan and Japanese companies like most global companies can't afford to give up on China as its surging middle class is getting bigger by the day.
Japanese companies probably need to re-set what it is they really want out of China and not expect too much as competition in China from Chinese companies it taking a lot of market share away from Japanese companies.
Aside from China being the weak link in Asia, at the present time the rest of Asia looks robust and looks like the markets in the rest of Asia are going to be a life-line for Japanese companies that might be seeing reduced exports to both the US and China.
And again, unfortunately the European Union is a weak link as exports to that area of the world just keeps getting weaker and weaker.
Blame it on the Ukraine war and or weak demand in the EU or any other reason for the continued low exports to the EU.
Have a nice day!
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